Thursday, April 21, 2011

Next bearish wave - Short term trend confirmed bullish

The market continued its way up today and it came very close to the high for the year in afterhours. However, the cash index did not produce the same levels and it seems to me like the wave has topped or will top on Monday morning as I see 5 clear waves from the 1294 bottom. This close turns the short term trend bullish so the next bearish wave should show where the market is headed next. If the market retraces to a Fib level in an non impulsive manner and closes above the TA, then it will be time to go long as the market will be in for another bullish wave. The only thing that could change the bullish scenario at this point is a major sell off on Monday that shows this last leg was just a C leg of an expanded flat. But given the fact oil, commodities, precious metals, etc. are rallying, it seems to me like this is a rally tied to the weakening dollar and thus the main driver for higher prices is the perception that the US dollar will continue to depreciate.

I went short today at the end of what I see as 5 waves and other TA factors. I figure this is a lower risk/high reward situation at this point. And if we just get a correction, then I will be all in long. I have most of my portfolio in Chinese equities, Chinese currency and Gold and that's about 50% of my holdings. And the other 50% is in dollars (cash), which I intend to switch away from since we will see the dollar at an all time low fairly soon.

Have a great weekend!

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